After months of dispute, the government has decided to bring an end to the farce of NHS Trusts forming wholly owned subsidiary companies – subcos – to avoid tax and to threaten staff terms and conditions.
In an announcement sent to all Trusts by NHS England’s ‘Financial Reset and Accountability Director’ Glen Burley (previously a leading advocate of subcos) states that any subcos involving the transfer of staff will now only be approved “in a limited number of circumstances, and only when there is clear union support”.
This is a historic achievement for the trade unions and the staff that have fought the imposition of subcos in Dorset and Newcastle. Other, more half-hearted proposals, will now presumably be quietly stopped.
The drive for subcos began with a small number of cases put up from 2015 – 2019, in which trusts proposed transferring hundreds of low-paid facilities management staff into subcos. If these had been “clinical” staff then Trusts would have been forced to follow proper procedures, but these staff were “other”. These plans were strongly opposed and, in almost every case, defeated. These disputes, especially in Bradford and Frimley Park, brought an end to the first wave of subcos. Wider interest also meant that assurances had to be given to HM Treasury that the NHS was not engaging in tax avoidance.
Opposition from trade unions and from Labour MPs (including some who are now Ministers) who had campaigned against subcos led to tighter regulation, finally published in 2024. This included significantly stronger measures to prevent tax avoidance. In theory, NHS England had to ensure that proposals were for operational or commercial reasons and not to gain tax advantages.
It was also spelt out very clearly that any proposals had to begin with proper engagement with staff and staff representatives. Most informed commentators believed that no subco proposal (where large numbers of staff would be transferred out of the NHS) could ever meet the requirements in the guidance and be approved.
Yet earlier this year it was suddenly announced by the NHS England Chief Executive Sir Jim Mackey (also until recently a strong advocate of subcos) that all Trusts had to form subcos to deliver a wide range of services (and save money by dodging VAT). In other words the guidance was simply to be ignored.
UNISON wrote to all Trusts setting out their opposition and making clear any moves to form a subco would be met by strong action. Some Trusts made clear that despite the pressure from NHS England they were firmly against subcos.
But – several Trusts, including in Dorset and Newcastle put forward plans and applied to NHS England for permission to form subcos. Despite the evidence that the proposals did not meet the requirements set out in the guidance, NHS England sat on the fence and neither approved nor rejected the applications.This absurd situation has remained unchanged for many months.
In Dorset, staff have just voted by a huge majority to take industrial action against the plans there. In response, managers heaped on the pressues by alleging that delays to the formation of the subco would mean redundancies.
The cases put forward in Dorset and Newcastle were subject to rigorous analysis and this showed that the reason for forming the subcos was tax avoidance. In Dorset, where the system is financially very challenged, it was openly admitted that the tax gains were the main driver, and that a decision had been take NOT to engage with staff until after the decision to form a subco had been taken. Despite this they appeared to have been told they could still go ahead.
After the initial adverse reaction to this lurch in policy, a new narrative was developed to say that subcos would be used to bring outsourced services back in-house and even to buy out PFIs. If any actual details about this were ever worked out, they never saw the light of day. And as the trade unions kept pointing out, use of subcos is still outsourcing.
Hopefully, this time, subcos will be properly rejected for good. There is no doubt that forming a subco can bring major financial gains from tax changes – but this is money lost to the Treasury (in VAT) – robbing Rachel to pay Wes. There are rumours this loophole will soon in any case be closed.
UNISON general secretary Christina McAnea said:
“Today’s announcement is a positive step in the right direction and shows ministers are listening to the union’s warnings.
“The NHS relies on support staff to keep hospitals clean, safe and running efficiently. They deserve the same pay and conditions as other health workers.
“Subsidiary companies have never been the right way to deliver NHS services and UNISON will keep campaigning for further change.
“Any trusts considering outsourcing need to think again and work with their staff on better ways to save money or reorganise services.”
Subcos were never really about improving services or being more efficient. Outsourcing creates a divided workforce and is wholly against the one-team spirit that should be at the heart of well-run Trusts. The pretence that somehow staff terms and conditions can be guaranteed even if the staff are employed in a subco is nonsense, and the history of these organisations shows some deliberately used the subco as a way to offer new staff worse terms and conditions … as a money-saver.
What next? Somebody needs to be held accountable for the significant waste of money and for the deterioration of staff morale these proposals have caused.
Why have guidance if it is not going to be enforced? Why have an NHS Constitution that requires engagement at the earliest opportunity … and then allow Trusts to deliberately ignore it? Do we really want to give these organisations even greater autonomy?
This must be a watershed, and the start of what was promised – the biggest-ever reversal of outsourcing. This must be the start of proper partnership working with staff and trade unions.
Any senior managers who reject partnership working and believe that two-tier terms and conditions are fine and that the lowest-paid non clinical staff can be treated separately – they need to go.
We keep hearing NHS management costs are to be reduced, despite the NHS being chronically short of management capacity and capability. Well, here is a place to start.
Dear Reader,
If you like our content please support our campaigning journalism to protect health care for all.
Our goal is to inform people, hold our politicians to account and help to build change through evidence based ideas.
Everyone should have access to comprehensive healthcare, but our NHS needs support. You can help us to continue to counter bad policy, battle neglect of the NHS and correct dangerous mis-infomation.
Supporters of the NHS are crucial in sustaining our health service and with your help we will be able to engage more people in securing its future.
Please donate to help support our campaigning NHS research and journalism.
After months of dispute, the government has decided to bring an end to the farce of NHS Trusts forming wholly owned subsidiary companies – subcos – to avoid tax and to threaten staff terms and conditions.
In an announcement sent to all Trusts by NHS England’s ‘Financial Reset and Accountability Director’ Glen Burley (previously a leading advocate of subcos) states that any subcos involving the transfer of staff will now only be approved “in a limited number of circumstances, and only when there is clear union support”.
This is a historic achievement for the trade unions and the staff that have fought the imposition of subcos in Dorset and Newcastle. Other, more half-hearted proposals, will now presumably be quietly stopped.
The drive for subcos began with a small number of cases put up from 2015 – 2019, in which trusts proposed transferring hundreds of low-paid facilities management staff into subcos. If these had been “clinical” staff then Trusts would have been forced to follow proper procedures, but these staff were “other”. These plans were strongly opposed and, in almost every case, defeated. These disputes, especially in Bradford and Frimley Park, brought an end to the first wave of subcos. Wider interest also meant that assurances had to be given to HM Treasury that the NHS was not engaging in tax avoidance.
Opposition from trade unions and from Labour MPs (including some who are now Ministers) who had campaigned against subcos led to tighter regulation, finally published in 2024. This included significantly stronger measures to prevent tax avoidance. In theory, NHS England had to ensure that proposals were for operational or commercial reasons and not to gain tax advantages.
It was also spelt out very clearly that any proposals had to begin with proper engagement with staff and staff representatives. Most informed commentators believed that no subco proposal (where large numbers of staff would be transferred out of the NHS) could ever meet the requirements in the guidance and be approved.
Yet earlier this year it was suddenly announced by the NHS England Chief Executive Sir Jim Mackey (also until recently a strong advocate of subcos) that all Trusts had to form subcos to deliver a wide range of services (and save money by dodging VAT). In other words the guidance was simply to be ignored.
UNISON wrote to all Trusts setting out their opposition and making clear any moves to form a subco would be met by strong action. Some Trusts made clear that despite the pressure from NHS England they were firmly against subcos.
But – several Trusts, including in Dorset and Newcastle put forward plans and applied to NHS England for permission to form subcos. Despite the evidence that the proposals did not meet the requirements set out in the guidance, NHS England sat on the fence and neither approved nor rejected the applications.This absurd situation has remained unchanged for many months.
In Dorset, staff have just voted by a huge majority to take industrial action against the plans there. In response, managers heaped on the pressues by alleging that delays to the formation of the subco would mean redundancies.
The cases put forward in Dorset and Newcastle were subject to rigorous analysis and this showed that the reason for forming the subcos was tax avoidance. In Dorset, where the system is financially very challenged, it was openly admitted that the tax gains were the main driver, and that a decision had been take NOT to engage with staff until after the decision to form a subco had been taken. Despite this they appeared to have been told they could still go ahead.
After the initial adverse reaction to this lurch in policy, a new narrative was developed to say that subcos would be used to bring outsourced services back in-house and even to buy out PFIs. If any actual details about this were ever worked out, they never saw the light of day. And as the trade unions kept pointing out, use of subcos is still outsourcing.
Hopefully, this time, subcos will be properly rejected for good. There is no doubt that forming a subco can bring major financial gains from tax changes – but this is money lost to the Treasury (in VAT) – robbing Rachel to pay Wes. There are rumours this loophole will soon in any case be closed.
UNISON general secretary Christina McAnea said:
Subcos were never really about improving services or being more efficient. Outsourcing creates a divided workforce and is wholly against the one-team spirit that should be at the heart of well-run Trusts. The pretence that somehow staff terms and conditions can be guaranteed even if the staff are employed in a subco is nonsense, and the history of these organisations shows some deliberately used the subco as a way to offer new staff worse terms and conditions … as a money-saver.
What next? Somebody needs to be held accountable for the significant waste of money and for the deterioration of staff morale these proposals have caused.
Why have guidance if it is not going to be enforced? Why have an NHS Constitution that requires engagement at the earliest opportunity … and then allow Trusts to deliberately ignore it? Do we really want to give these organisations even greater autonomy?
This must be a watershed, and the start of what was promised – the biggest-ever reversal of outsourcing. This must be the start of proper partnership working with staff and trade unions.
Any senior managers who reject partnership working and believe that two-tier terms and conditions are fine and that the lowest-paid non clinical staff can be treated separately – they need to go.
We keep hearing NHS management costs are to be reduced, despite the NHS being chronically short of management capacity and capability. Well, here is a place to start.
Dear Reader,
If you like our content please support our campaigning journalism to protect health care for all.
Our goal is to inform people, hold our politicians to account and help to build change through evidence based ideas.
Everyone should have access to comprehensive healthcare, but our NHS needs support. You can help us to continue to counter bad policy, battle neglect of the NHS and correct dangerous mis-infomation.
Supporters of the NHS are crucial in sustaining our health service and with your help we will be able to engage more people in securing its future.
Please donate to help support our campaigning NHS research and journalism.
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